Altice USA: 10% Fall Since AT&T's Warner Spin-Off News Was Overreaction (Preview)

Company Update (ATUS US) (Buy)

Summary

• Altice USA stock has fallen more than 10% since AT&T announced its Warner spin-off, as investors fear the resulting fiber expansion.

• Altice USA has managed the overlap with Verizon FIOS fiber well, now has a mostly 1 Gbps+ network, and only overlaps with AT&T partially.

• AT&T won't alter its CapEx plans until mid-2022. In the meantime, Altice USA's Q1 results and FY21 outlook both showed stable growth.

• Stock is trading at a 8.5% Free Cash Flow Yield and management is aggressively buying back shares, helping per-share earnings growth.

• With shares at $33.78, we expect an exit price of $65 and a total return of 91% (18.6% annualized) by 2024. Buy

Introduction

We review our Altice USA investment case after the stock fell 10.7% since AT&T announced its Warner Media spin-off on May 17. (Peers Charter and Comcast have fallen only 3.9% and 2.9% respectively.)

We originally upgraded our rating on Altice USA to Buy in November 2020, in addition to existing Buy ratings on Charter and Comcast (fro…